Mortgage & Wealth Strategies

What will tip the scales next in Canada's mortgage market?

August 12, 2025 | Posted by: Matt Broom-Hall

We’re heading into the dog days of summer, but there’s no slowing down in the mortgage world. Last week’s job numbers raised some eyebrows and gave us a fresh lens through which to view where Canadian mortgage rates might be headed next. If you’ve been waiting for a clearer signal on fixed vs. variable—or wondering whether it’s finally okay to start negotiating on a property again—this week's update is for you.

Let’s start with the numbers: Canada shed 41,000 jobs in July, marking a stubborn turn in our economic momentum. That’s not great news on its own, but when paired with ongoing global uncertainty—particularly the back-and-forth on U.S. tariffs—it paints a blurry picture for our short-term financial outlook. While job losses often nudge interest rates downward, the continued strength of inflationary signals (like persistent price pressures in both Canada and the US) complicates things.

South of the border, U.S. Federal Reserve watchers are now betting with 95% confidence that a rate cut is coming in September. But bond markets aren’t reacting as expected. Rather than softening, long-term yields are ticking upward—likely due to fears of inflation fueled by tariffs and heavy government spending. Like it or not, the U.S. tone shapes a lot of our own economic decisions in Canada.

Back home, Government of Canada bond yields dipped slightly last week, but not dramatically enough to trigger broad changes to fixed mortgage rates. A few lenders did walk back recent hikes—some of which were ill-timed with our weak job report—but most fixed rates held steady. Meanwhile, discounts on variable rates stayed flat, despite rising expectations that the Bank of Canada will pivot on rates… eventually.

So where does this leave us in terms of strategy?

Three- and five-year fixed mortgage rates are currently hovering at similar levels. That’s an unusual situation, and it creates an opportunity: if you’re eyeing a fixed term, the five-year option offers better long-term value without an upfront rate penalty. Meanwhile, variable rates might still turn out to be the cheapest over time—but only for those comfortable managing the ride if the path gets bumpy.

Here’s a shift worth noting beyond just rates: financing conditions on home offers are making a quiet comeback. Over the past several years—especially in hot markets—buyers basically had to go in unconditional (Toronto & Vancouver) to stay competitive. But as balance slowly returns to many regional real estate markets, including in Alberta, buyers are finding more room to include financing clauses and protect themselves. That’s a very good thing, especially in today’s uncertain economic environment.

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